WASHINGTON – The Treasury Department yesterday agreed to provide $1 billion in 2% loans to 800 financial institutions – including fewer than 100 credit unions – certified as community development financial institutions through its CDFI program.
The money will come from the Treasury’s $700 billion Troubled Asset Relief Program, but is separate from a $30 billion TARP program launched earlier this week for troubled banks.
The fund will be loaned to CDFIs at 2%, compared to the 5% rate charged for capital infusions under the TARP program. It’s hard to tell what kind of demand credit unions will have for the loans as there has been little demand the past two years for community development loans made by NCUA at 1%.
Administration officials said it was "essential to step in and provide capital" to increase lending to small businesses and other needs in low-income areas. "The basic pipes of the financial system – the credit pipes – are starting to open again," said Treasury Secretary Timothy Geithner.
Credit unions are eligible to apply for funds up to 3.5% of their total assets, which officials said was equivalent to the 5% risk-weighted figure for banks.
NCUA will set the guidelines for credit union participation in the program.
